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covered call writing calculations

Rolling Out-And-Up: Explaining “Bought-Up” Value

Covered call writing calculations should be as accurate as possible so that we can assess the success and feasibility of our trades. When we roll in-the-money (ITM) options out-and-up there is frequently an option debit which, on first glance, may make the trade appear to be a losing one. However, by factoring in the impact […]

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Interpreting Exit Strategy Calculations Versus Final Calculations

Mastering option calculations is an essential skill needed to attain the very highest covered call writing returns. Although the Ellman Calculator will do most of the heavy lifting for us, understanding the reasons behind these calculations and when and how to apply them, will make us all more skilled investors. Recently a BCI member sent […]

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Ask Alan

Ask Alan #160 – Comparing Protective Puts and Position Unwinding as Strike Moves Deep In-The-Money

Alan answers a question posed by Doug, who asks: Alan, What are your thoughts on the following: Purchased 100 shares of ALXN (Alexion Pharmaceuticals) on 3/15 at $135.18 and sold the $135 call expiring on 4/18 at $5.11. The stock is trading at $140.42 on 4/5 and considering buying a $135 put for $1.05 to […]

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technical analysis for covered call writing

Covered Call Writing with a Biotech Company: A Real-Life Example with Argenx (NASDAQ: ARGX)

Covered call writing (as well as put-selling) premiums are directly related to the implied volatility of the underlying stock or exchange-traded fund (ETF). Biotech stocks are particularly volatile due to the success (or lack thereof) of the pharmaceuticals they are developing. Highly volatile underlyings represent the good news of higher premiums and the bad news […]

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covered call writing calculations

In-The-Money Covered Calls: Intrinsic Value Protects Time Value: A Real-Life Example with TEAM + New Tool Coming Soon

Meaningful option calculations are essential in determining if the premiums meet our covered call writing goals. To this end, we must understand the mathematics of these calculations to become elite option-sellers. Now don’t worry…we don’t have to become Albert Einstein to be successful. But we do have to have a general understanding of the components […]

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Poor Man's Covered Call Calculator

Structuring a Poor Man’s Covered Call Trade with The Coca-Cola Company

The Poor Man’s Covered Call (PMCC) is a covered call writing-like strategy where short calls are sold against LEAPS options. There are pros and cons to this trading approach but the main advantage is that these trades can be executed at a lower cost than traditional covered call writing. Options (LEAPS, in this case) are […]

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call option

Cash-Secured Call Options

One of our favorite option-selling strategies is selling cash-secured puts. This involves selling (usually out-of-the-money) put options and securing the possible future contract assignment with the appropriate amount of cash. What about cash-secured call options also referred to as cash covered call options? This latter strategy is quite different from traditional covered call writing in […]

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Let’s Take a Test: Can You Answer Correctly?

Stock options is a category found in required examinations for certified financial planners. In May 2019, Richard contacted me because he was “miffed” at one of the answers provided for one of the questions in the CFP financial planner test question databank. I thought it would be a fun and productive exercise for the BCI […]

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stock repair strategy

Stock Repair Strategy: Breakeven Versus Loss-Reduction Objectives

Call options can be used to reduce losses on long stock positions. Depending on the degree our share value has declined, our target can be to lower our breakeven point or to lock-in but reduce losses. In December 2018, Sunny shared a stock repair trade he was considering involving FedEx Corp. (NYSE: FDX). At the […]

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covered call writing seminars

“Hitting a Double” or “Mid-Contract Unwind Exit Strategy”: Which Exit Strategy Did I Just Use?

Mastering exit strategies is the 3rd required skill for successful covered call writing and put-selling. On November 28, 2018, Nirav wrote to me regarding a series of trades he executed and wanted to know how to categorize the position management aspect of these trades. This article will highlight the differences between “hitting a double” and […]

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